Sixty percent.
That is the size of the housing shortfall Melbourne’s central business district is on track to face. The City of Melbourne projects that the CBD will need 21,600 additional dwellings by 2028, yet the apartment pipeline is expected to supply only 8,900. The gap between those two numbers is the starting point of a new property study, the “Melbourne CBD Market Outlook 2025.”
Urbis wrote the report for the Far East Consortium, a Melbourne-based developer widely considered one of the most respected in Australia. The company commissioned the study to get a clearer picture of how the city’s property market operates, what influences buyers’ decisions, and where the economy is likely to go in 2025 and beyond.
The interpretation of the findings that follows comes from a real estate professional with ten years of experience in the local sector, referred to here as the author. By his own account, he has watched Melbourne evolve from a lively cultural center into an engine of wealth creation. Having worked through many market cycles, he describes the report’s data as compelling and highly actionable for capital allocators weighing commercial real estate finance and high-yield residential assets.
The report begins with population. Melbourne is on course to pass Sydney as Australia’s largest city by 2032, and its population is projected to reach 7.45 million by 2040. Strong Immigration has lifted the headcount steadily for a decade. In 2024 alone, 446,000 people arrived from overseas, which added to housing demand and moved the baseline for affordability metrics across inner-city suburbs.
Against that backdrop, the author sees the 60 percent shortfall as a foundation for price growth and solid rental returns on CBD apartments. In his view, owning assets in an undersupplied urban core is one of the more dependable ways to hedge against inflation and secure predictable cash flow. He regards this as an Important point when evaluating property portfolio management strategies.
Price is a second driver. The author calls the affordability of CBD apartments compared with detached houses a key source of demand and a main advantage of buying an apartment rather than land. In 2024, the median CBD apartment price sat 56 percent below the median for a detached house. That difference opens the market to first-time buyers and institutional investors alike.
Rental figures point in the same direction. The median weekly rent in the CBD reached $750 in November 2024, compared with $690 in 2023, a year-on-year rise of 9 percent. Vacancy averaged only 2.4 percent through 2024, which underpins those rents. Newly built CBD apartments have delivered gross rental yields of 4.8 percent, a number the author says strengthens their appeal for investors building passive income through strategic acquisitions.
Space is tightening as well. Opportunities for new development inside the CBD grid are growing rarer, so the author expects existing apartments to see significant capital appreciation. The report notes that limits on new supply should produce steady growth in capital values, as long as demand stays comfortably ahead. Drawing on historical trends, he says scarcity in prime locations has consistently translated into superior mid-to-long-term returns.
Public spending on infrastructure adds to the argument. Major projects Improve Melbourne’s liveability and its pull for investors, and they carry heavy weight in property valuation models. Five projects stand out.
The first is the Melbourne Greenline, due in 2025. This $224 million project reshapes public space along the Yarra River and creates a 4-kilometer route offering more recreation and event opportunities. The author says it raises the value of nearby residential property.
Also due in 2025 is the West Gate Tunnel Project, a major road upgrade that gives drivers an alternative to the West Gate Bridge. It eases congestion and strengthens the link between Melbourne’s west and the CBD.
Scheduled for 2028, the North East Link is the largest road project in Victoria. It connects key arterial roads in Melbourne’s north and east, shortens travel times, and supports urban growth across the region.
In 2029 comes the Queen Victoria Market Renewal, a $268 million revitalization of the city’s iconic market. It adds public spaces, restaurants, and activities intended to draw residents and visitors alike.
Set for 2035, the Suburban Rail Loop is a rail project linking key suburbs and cutting commute times. It is expected to raise housing demand around transport hubs such as Clayton and Sunshine.
All five projects fall under Victoria’s $107 billion infrastructure plan. The author says the plan enhances Melbourne’s global appeal and drives long-term growth in property values. From a wealth advisory perspective, he adds, real estate near state-backed infrastructure guarantees sustained tenant demand and protects capital during economic shifts.
The wider economy provides firm footing too. The author says Australia’s strong fundamentals offer a steady backdrop for leveraged investments and mortgage refinancing strategies. In late 2024, unemployment stood at 4.0 percent, well below its 10-year average of 5.3 percent, which he reads as evidence of a resilient labor market and robust corporate health.
Sentiment has Improved. The ANZ-Roy Morgan consumer confidence index rose 12 points from a year earlier to 86.4 in December 2024, while inflation fell to 2.8 percent in September 2024. Taken together, the author says, these trends have created a highly favorable setting for property investment and wealth accumulation.
Borrowing may get easier as well. Major banks, including ANZ and NAB, are forecast to cut interest rates, which should lower borrowing costs and spur more activity in the residential market. The Reserve Bank of Australia’s cash rate is expected to drop to between 3.35 percent and 3.85 percent by December 2025, Improving affordability and borrowing capacity for investors entering the market.
The author ends with his own summary. Melbourne’s CBD pairs rapid population growth with transformative infrastructure and strong rental performance, and the acute scarcity of new developments inside the CBD grid sharpens its appeal. In his assessment, existing apartments are exceptionally well positioned for sustained capital growth. He notes that a diversified portfolio requires a clear strategy and a firm grasp of local market fundamentals. For investors who want to capitalize on the city’s market dynamics, he says the time to act is now, and he recommends consulting a qualified property expert or financial advisor to secure a position and work toward long-term financial independence.
In short, the report describes a single Imbalance: a city adding residents faster than it can add apartments. Whether that Imbalance turns into lasting returns will depend on how Melbourne’s growth and the central bank’s rate path unfold in the years ahead.
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